TITLE : BUSINESS PLAN

BUSINESS NAME : MARYLEAKY AUTO SPARES

PRESENTED BY : GITAU CHRISTINE WATIRI

COURSE CODE : 2503

COURSE : DIPLOMA IN AUTOMOTIVE ENGINEERING

INDEX NUMBER : 2071011339

INSTITUTION : THIKA TECHNICAL TRAINING INSTITUTE

SUPERVISOR : MR KIERU

PRESENTED TO : KENYA NATIONAL EXAMINATION COUNCIL

EXAM SERIES : JULY 2020

i
 DECLARATION
I declare that this is my original work and it has never been submitted to any examination body
for aware of diploma

CANDIDATE NAME: GITAU CHRISTINE WATIRI

SIGNATURE_________________________________________

DATE_______________________________________________

SUPERVISOR NAME: MR. KIERU

SIGNATURE_________________________________________

DATE_______________________________________________
 ACKNOWLEDGEMENT
I wish to express my heartfelt gratitude and my valued support to all those who participated to
seeing the completion and compiling of this work

To my parents especially for their unconditional and unlimited moral, social and financial
support that I needed the most of your effort only God can reward.

To my classmates, I do also salute them for their effort and co-operation in making me
successes.

ii
 DEDICATION
I dedicated this business plan to my lovely parents, I also extend my dedication to my
classmates, brother and sisters.

May the Almighty God bless you all.

Table of Contents
DEDICATION.............................................................................................................................................i

iii
ACKNOWLEDGEMENT...........................................................................................................................ii
DEDICATION............................................................................................................................................iii
CHAPTER ONE..........................................................................................................................................1
1.0BUSINESS DESCRIPTION..................................................................................................................1
1.1 BACKGROUND OF THE OWNER.....................................................................................................1
1.2 BUSINESS NAME...............................................................................................................................1
1.3 BUSINESS LOCATION AND ADDRESS...........................................................................................2
1.4 FORM OF OWNERSHIP......................................................................................................................3
1.5 TYPE OF THE BUSINESS...................................................................................................................4
1.6 PRODUCT AND SERVICES...............................................................................................................4
1.7 JUSTIFICATION OF OPPORTUNITY................................................................................................4
1.8 INDUSTRIES........................................................................................................................................5
1.9 GOALS OF THE BUSINESS AND OBJECTIVES..............................................................................5
1.10 ENTRY AND GROWTH STRATEGIES...........................................................................................5
1.11 SWOT ANALYSIS.............................................................................................................................5
1.12 POTENTIAL RISKS...........................................................................................................................6
CHAPTER TWO.........................................................................................................................................7
MARKETING PLAN..................................................................................................................................7
2.0 OBJECTIVES.......................................................................................................................................7
2.1 POTENTIAL CUSTOMERS................................................................................................................7
2.2 MARKET TREND................................................................................................................................7
2.3 COMPLETION.....................................................................................................................................7
2.4 COPING WITH COMPETITION.........................................................................................................7
2.5 MARKET SHARE................................................................................................................................8
2.6 RISING STRATEGY............................................................................................................................8
2.7 PRODUCTION STRATEGIES.............................................................................................................8
2.8 SALES TACTICS.................................................................................................................................8
2.9 DISTRIBUTION STRATEGY..............................................................................................................8
CHAPTER THREE.....................................................................................................................................9
MANAGEMENT/ORGANIZATION PLAN..............................................................................................9
3.0 OBJECTIVES.......................................................................................................................................9
3.1 PERSONNEL........................................................................................................................................9

iv
3.2 RECRUITMENT.................................................................................................................................11
3.3 TRAINING AND STAFF DEVELOPMENT.....................................................................................12
3.4 BENEFITS AND INCENTIVES.........................................................................................................12
3.5 PROPOSED SALARY STRUCTURE................................................................................................12
3.6 SUPPORT SERVIVES........................................................................................................................14
3.7 ORGANIZATION STRUCTURE.......................................................................................................15
3.8 COMMUNICATION..........................................................................................................................15
3.9 CODE OF CONDUCT........................................................................................................................16
3.10 ANTICIPATED PROBLEMS...........................................................................................................16
3.11 REMEDIES.......................................................................................................................................16
CHAPTER FOUR.....................................................................................................................................17
PRODUCTION/OPERATION PLAN.......................................................................................................17
4.1 OBJECTIVES.....................................................................................................................................17
4.2 PRODUCTION FACILITIES.............................................................................................................17
4.3 PRODUCTION SERVICES................................................................................................................17
4.4 PRODUCTION PROCESS.................................................................................................................18
4.5 COSTING STRATEGY......................................................................................................................18
4.6 INVENTORY CONTROL..................................................................................................................19
4.7 PREMISES..........................................................................................................................................19
4.8 POSSIBLE HINDRANCES................................................................................................................20
CHAPTER FIVE.......................................................................................................................................21
5.0 OBJECTIVES.....................................................................................................................................21
5.1 PRE-OPERATIONAL COST..............................................................................................................21
5.2 FINANCIAL REQUIREMENT..........................................................................................................21
5.3 WORKING CAPITAL........................................................................................................................22
5.4 PERFORMANCE INCOME STATEMENT.......................................................................................23
5.6 BALANCE SHEET.............................................................................................................................24
5.7 PERFOMANCE RATIOS...................................................................................................................25
5.8 BREAKEVEN POINT........................................................................................................................26
5.9 DESIRED FINANCING.....................................................................................................................26
5.10 CHALLENGES.................................................................................................................................27
5.11 REMEDIES.......................................................................................................................................29

v
EXECUTIVE SUMMARY

vi
This includes the business description, marketing plan, operation plan and financial plan. These
are the main components to be dealt with and researched has been done to ensure whatever is
presented appears in this content.

BUSINESS DESCRIPTION
Maryleaky Auto Spare will be selling quality parts required for any automobile repair and
service. The enterprise will be located in Wajir town. The sales will be promoted and advertised
in different towns that will be possible.

MARKETING PLAN
To have a successful business the market should be considered and scrutinize to ensure the best
customer satisfaction. Wajir town is a growing town that has potential customers that will ensure
flow of customers to the premises.

ORGANIZATION AND MANAGEMENT PLAN

The owner will be the sole proprietor of the business venture. The management team will be
made of skilled personnel. This will include lawyers, financers, sale persons and supporting
workers.

OPERATION PLAN
Strategies will be put in place to ensure smooth running of the business. Some item will be
required such as computers for sales and finance process, furniture and the facilities for running
the business.

FINANCIAL PLAN
For any business to run capital and funds should be planned, considered and adequate to make
the make business a success. The business cash flow and other statements will be also given. The
capital will be from personal savings, relatives and bank loans.

vii
 CHAPTER ONE

1.0BUSINESS DESCRIPTION
I Gitau Christine Watiri will start and operate a sole proprietorship business by the name Joes’
electronic shop which will be offering all kinds of motor vehicle spares and autospares, and all
varieties of autospares cables to all customers across the country and the neighboring countries
as well. The business name is significant to be the enterprise since it is the only business with
that name hence there will be no confusion among customers. The business has the aim of
providing and availing quality electronic products to the customers satisfaction; the business will
also open many branches across the country in order to reach out to our customers. The business
will create a website whereby customers can shop online and the goods are delivered to the
customer’s premises once the payment is made. The product will be tested to ensure that they are
in the right working condition

1.1 BACKGROUND OF THE OWNER

I go by the name Gitau Christine Watiri. I come from a middle class family. And having grown
up in a family that is not very stable financially life has taught me on how to be self-independent
and to be hardworking in only field as well as to be able to create new jobs for the people living
in our society. I can be able to generate funds from the small business that I create any time is
sport on opportunity and manage the income. I am a college students perusing information
communication technology since I have been employed in an electronic shop for only one year
and the business was making great profit and in can use the experience I have to make my
business. My address in 149 Wajir

1.2 BUSINESS NAME

The enterprise will be called Maryleaky Auto Spares. The reason as to why I came up with the
above name is so that people can identify the business with my name since there is no other
business branded by that name in the whole country therefore customers will not get confused

1
1.3 BUSINESS LOCATION AND ADDRESS
The business will be located along Wajir road. The business will be situated beside Nakumattt
supermarket and also beside oilybia petro station

The address on which the business will operate will operate on will be:

MARYLEAKY AUTO SPARES

P.O BOX 189

Wajir

Tel: 0740 538169

Email: maryleakyauto@gmail.com

2
ET
 SUPERM
TUS
G

MARYLEAKEY AUTO
E

SPARES SHOP
N
E GA
R RI
A SS
L
NAKUM
A

TOWN
K
ATT
RO

WAJIR
A AD
G

1.4 FORM OF OWNERSHIP

The business will be a sole proprietorship business

Reason for sole proprietorship

a) There is fast decision making in sole proprietorship since there is no consulting

b) There is no sharing of profit with anyone
c) One can work for long hours in order to make more profit
d) One can get support from family members
e) The cost of starting and running the business are very low
f) The top secrets of the business are maintained by the owner
g) It is flexible – you can change the legal structure of the business is circumstances change
h) You can easily wind up
i) The business

3
Disadvantages

a) It can lead to poor decision making since the owner does not have anybody to exchange
ideas with
b) You have limited sources of capital
c) The owner has unlimited liability- incase the assets of the business are not enough to
settle business debts personal properly can be taken and sold in order to settle business
depts.
d) Incase or death of the owner the business is affected adversely
e) You are taxed alone

1.5 TYPE OF THE BUSINESS

The business will be new start up in the market which will be registered under the business name
indicated above and it will contain all the legal document.

1.6 PRODUCT AND SERVICES

My business will offer product like electrical cables, power cables, electric bulbs phone charges
and battery and many more. The services offered by the business will be free delivery when you
buy products in large quantity provided that. Your residence or business is between 50-60
kilometers from where my business is located.

The product that I will selling will be more durable and of greats performance to my customers.
The products will also provide the customer with more than just comfort but also they will be
convenient and they will suit the customers need. The products will be of various colours, shape
and size and of high quality as well.

1.7 JUSTIFICATION OF OPPORTUNITY

The business was started in order to provide quality electronic cable in order to minimize cases
of houses catching fire and destroying lots of properties and causing death in some extreme case.
It was also started because of the rich market since the cost of installing electricity in homes has
greatly reduces. The business was also started because of technological advancement since
people need products like computers and woofers for entertainment. The business is also my
source of income.

4
1.8 INDUSTRIES
The ‘business will be under electrical and autospares industry since its main products use
electricity in order to function. The business will start as a medium size business and later open
branches in other parts of the country. The business will be registered under the county council
of Wajir where business transactions will be carried out.

1.9 GOALS OF THE BUSINESS AND OBJECTIVES

The main goal of the business will be to open other branches in the country and the world at
large. The short term goal is to increase employment opportunity by 30% in each and every
financial year. Some of the other goal will be to avail high quality and durable products near the
customer’s promises so as to satisfy the customers’ promises so as to satisfy the customers’
needs and wants fully

1.10 ENTRY AND GROWTH STRATEGIES

For my business to enter and gain acceptance in the market it will offer high quality products in
order to match the already existing business or even out do them. It will use posters, television
and radio to help in advertising our products and so as to create awareness to the public for its
existence. It will also avail products at low and affordable prices in order to attract more
customers. Furthermore the business will be giving free transport to goods worth more than
100,000. My business will also embrace the culture of saving so as to avoid a situation where the
business will be decided bankrupt. Other than that my business will be involving its employees
in decision making and also the public in order to know the taste of our customers

1.11 SWOT ANALYSIS

a) Strengths
Great motivation
Good public relation
High quality products
Good management
Rich market
b) Weakness
Financial constraints
Unfavorable government policies

5
 c) Opportunities
Availability of money lending institution such as banks
Ample security for the business
Sole of products at for prices

d) Threats
Competition
Delay in salary payment
Lack of acceptance in the industry

1.12 POTENTIAL RISKS

Large competition from existing and upcoming business
Delayed salary payment
Fire
Theft

6
 CHAPTER TWO

MARKETING PLAN

2.0 OBJECTIVES
To create employment for the citizens of Kenya about fifty worker of my business by one year.

2.1 POTENTIAL CUSTOMERS

The business will target homes and residential plots where electricity is installed or home where
there are solar panel and they use electricity on a daily basis .

2.2 MARKET TREND

Due to the reduced cost of installing electricity in residential areas people become more
interested in having products that use electricity like television, radio, laptops e.t. for the personal
entertainment, also since the cost of installing electricity is greatly reduced this means that many
people will afford that and this will ensure a steady market for electronic commodities.

2.3 COMPLETION
The business will face competitors such as MAN-U autospares, JIVAD etc. but my business will
be able to outdo them by availing high quality products and providing free transport for the
goods worth more than 100,00. The business will also be giving a one year warranty to the
products sold according to the terms of sale.

2.4 COPING WITH COMPETITION

In order to compete effectively my company will enhance and render improvement in the
following field.

Reduce price in order to attract more customers

Improve work performance by employing skilled laborers

Deal in original and durable services\digitizing the operation in the business in order to improve
on service delivery

2.5 MARKET SHARE

My business will increase the market share in order to indicate the competitiveness of the
business against its competitors. It will help increasing revenue for the government and also help
the manager elevate the demand in the market so as to help in providing the best quality

7
2.6 RISING STRATEGY
The business will keep investment checkup plan to see whether the business is doing well and
also to avoid closure of business operation

2.7 PRODUCTION STRATEGIES

The business will scan the environment for both international and external so as to understand
the aspect of external environment thus helps in increasing the sales in order to achieve
sustainable competitive advantage over our competitors

2.8 SALES TACTICS

The business will build and maintain a network or contacts associates and friends who will
support the business by information and referrals. It will also keep the customers happy by
providing great customer service and when they are happy they will tell their friends

2.9 DISTRIBUTION STRATEGY

After some growth and development the business will expand its branches to other parts of the
country thus diversifying business operation and this leads to an increase in the sales volume.

8
 CHAPTER THREE

MANAGEMENT/ORGANIZATION PLAN

3.0 OBJECTIVES
To train fifteen percent of the company member in their respective areas specialization after 13
months of operations.

3.1 PERSONNEL
The business will require three main position i.e. general manager, accountant and shopkeeper.
These personnel will be in charge of general administration. These people are to be consulted
when need arises

General Manager

Qualification

a) He/she must be computer literate

b) Must have at least four year experience in leadership position
c) Must have good communication skills
d) Must have a diploma in business administration
e) Must have a diploma in sales and marketing

Duties

a) He will be the overall director

b) He will provide effective management skills
c) He will be in charge of providing effective marketing strategies
d) Ensuring that the business is a success by watching profit trend and making decision
accordingly

9
Seller

Qualification

a) Have a certificate in sales and marketing

b) Good communication and interpersonal skills

Duties

a) Keeping records on stock to ensure there is no over or under stocking

b) Selling products to customers

Accountant

Qualification

a) Should have a diploma in accounting

b) Good communication skills
c) Two year experience in accounting
d) Should be computer literate

Duties

a) Keeping books of account of the business

b) Recording daily financial transactions e.g. cash inflows and outflows
c) Making available financial record at the end of each financial year

Subordinate stuff

Cleaners

Qualification

a) Must have form 4 certificate

b) Should be self-driven
c) Should be able to communicate both English and Kiswahili

Duties

10
 a) Ensure that business premises are clean all the time

Making available list of cleaning necessities to the accountant for procurement

Driver

Qualification

a) Must have a driving license from a recognized driving school

b) Have at least two years of working experience

Duties

a) In charge of all deliveries to be made to customers from suppliers

3.2 RECRUITMENT
This will indicate scheme through which the business will use to hire employ highly skilled
personnel in case a post falls vacant

The first stop in filling position that have fallen vacant is advertisement of that particular post to
the public indicating relevant job specifications

The second is shortlisting of applicant after thorough scrutiny of their resumes and accordingly
awarding marks so that only the highly qualified are picked

The third stage is interviewing of the shortlisted candidate

There might be more than one interview to ensure application in the interview process the
candidates picked at the interview are placed at their relevant job position in the business. This is
followed by induction to make sure they adapt in the new environment

3.3 TRAINING AND STAFF DEVELOPMENT

Training will be done to the newly employed people to make sure that they are equal to the task.
Staff development is done to all the employees in the business through a gradual process to
ensure they adapt to business dynamics such as technological advancement. Furthermore there
will be promotion to be made to the few individuals who will have a remarkable job.

11
3.4 BENEFITS AND INCENTIVES
Benefits are aimed at motivating the employees. This is things like salary increment, bonuses and
allowances. Promotions also motivate employee in the business since they fell that the business
is giving them a chance to achieve their own goals beside the organizational goals and
objectives. Also my business will be organizing annual tour where the workers will choose a site
of their own and will be taken there to refresh their minds and get to learn other things outside
business activities

3.5 PROPOSED SALARY STRUCTURE

Manager

Basic salary 10000

House allowance 4000
Medical allowance 2000
Leave allowance 1000
Commuter allowance 1000
Gross salary 18000
Accountant

Basic salary 8000

House allowance 1000
Medical allowance 1000
Leave allowance 800
Commuter allowance 800
Gross salary 11600

Seller

Basic salary 5000

House allowance 1000
Medical allowance 1000
Leave allowance 800
Commuter allowance 800
Gross salary 9600

Driver

Basic salary 3000

House allowance 1000
Medical allowance 1000

12
Leave allowance 800
Commuter allowance 800
Gross salary 6600

Cleaner

Basic salary 1500

House allowance 500
Medical allowance 500
Leave allowance 500
Commuter allowance 500
Gross salary 4500

Job title No. of workers Salary

Manager 1 18000
Accountant 1 11600
Seller 1 9600
Driver1 1 6600
Cleaner 1 4500
TOTAL 50300

3.6 SUPPORT SERVIVES

SERVICE PROVIDER
Auditor Sheme accounting farm
A.
Banking Kenya Commercial Bank
B.
Insurance Madison insurance
C.
Security Tatu guard security
D.

13
3.7 ORGANIZATION STRUCTURE

MANAGER

ASSISTANT MANAGER

ACCOUNTS CLERK

14

SUPPORT SUPPORT SUPPORT

STAFFS STAFFS STAFFS
 OPERATIVES

Manager
Accountant
Driver, seller, cleaner

3.8 COMMUNICATION
My business will apply vertical mode of communication. This is whereby subordinate staff
cannot talk directly to the top level manager but will air the grievances to the middle level
manager who will then communicate to the top level managers on their behalf who then make
decision accordingly. Also openness and transparency the employees will be allowed to give
their suggestions regarding various operations in the business.

3.9 CODE OF CONDUCT

In my company every member must be self-motivated and self-driven and this will result in the
company making great profits. Every individuals in the organization must be courteous, honest
and polite to the other workers since good relationship will enhance team work which will make
the business be able to overcome all challenges that are coming on its way.

3.10 ANTICIPATED PROBLEMS

Lack of skills

This is due to the dynamics in the business environment in areas such as technological
advancement whereby workers may be able to put up with such trends.

Inadequate finance

15
The initial capital to start a business is always a challenge couple with the fact that the money
lending institutions such as bank charge inflated interest rates.

Use of outdated technology

Use of annual instead of computerized system lead to inefficiency.

3.11 REMEDIES
To eliminate the challenge of lack of skilled personnel there will be training for employees

To cope with issues of inadequate fund the business will seek alternative source of capital such
as Sacco’s

CHAPTER FOUR

PRODUCTION/OPERATION PLAN

4.1 OBJECTIVES
To provide the best service to the customers

Sale of high quality and durable goods at an affordable prices

To improve on service delivery to our beloved customers

16
4.2 PRODUCTION FACILITIES
Items Units Type Price/unit Total
Computer 3 Dell 9000 270000
Pick-up 1 Toyota 500000 500000
Counter book 2 Kasuku 300 600
Receipts 10 Kasuku 200 400
Total 528000

4.3 PRODUCTION SERVICES

Items Units Suppliers Price/unit Total
Television 4 Hotpoint 1800 72000
Computers 4 Dell 8000 32000
Phones 6 Techno 10000 60000
Electrical cables
Electrical bulbs 10 Philips 3000 30000
Refrigerators 5 LG 50000 250000
Total 444000

4.4 PRODUCTION PROCESS

Buying of materials

This stage entails buying of goods and services which will make my business run accordingly to
plan

Transporting

This will be done by the business pick-up if the suppliers do not offer transportation of the goods
supplied. The transportation chain will be from the supplier to the warehouse then to the business
premises where the selling will take place

Stocking of the goods

17
There will be a warehouse where the goods will be stored temporarily before being transported
to the actual business premises. There will be a computerized stock management system to
ensure there is no overstocking or under stocking

Selling of the materials

The goods will be sold directly to the customers over the counter and insurance of a receipt
thereafter for proper record keeping. The modes of payment will be both cash payment and non-
cash payment such as M-pesa and credit cash. Credit will be available to the regular customers

4.5 COSTING STRATEGY

Cost of materials

This is the main factor to consider since the aim of starting of the business is to maximize profit
and minimize all the other costs.

Competitors

The prices charged will be in line with the prices charged by other enterprises in the same line of
the business as my own business. The prices will not be too low since the customers will mistake
them for poor standard goods and at the same time they will not be too high to avoid scanning
aware customers to where the products are cheaper but the customers can rest assured of quality
good and prices that are good to their pockets

Expenses

The business aims at reducing operational costs as well as not compromising on performance.
This extra cost are water bills, electricity bills and transport cost

4.6 INVENTORY CONTROL

There be a computerized inventory control system where sales and purchases will be recorded in
order to ensure that demand and supply dynamics are met
SHOP
AUTOSPARES
MARYLEAKEY

WAJIR TOWN
M.K.U

4.7 PREMISES

18
 WAJIR GENERAL HOSPITAL NANASI HOTEL
POLICE POST

NAKUMATT

4.8 POSSIBLE HINDRANCES

Theft

Some untrustworthy may steal good or give inaccurate record of operation. Also due to the
insecurity levels in surrounding area thieves may steal goods from the warehouse or from
business premises.this can be overcome by employing enough security guards and seeking
services of external avails’ to look in the books of accounts

Breakages

Some goods are prone to breakages which makes them to be in no condition to be sold. These
can be solved by handling the goods carefully

Skills

Since it is expensive to employ qualified personnel such as computer experts, auditor’s,

accountants and managers the business plan to be training the already existing employees as they
will not demand very high salaries since the business will cater for their training

19
 CHAPTER FIVE

5.0 OBJECTIVES
To have repaid 50% of all the loans at the end of 2 ½ years

To increase profit by 10% every financial year

To increase the salary of employees by 18% at the end of every year.

5.1 PRE-OPERATIONAL COST

Item Amount
RENTS 20000
Renovation 7000
License 10000
Electricity 5000
Total 421000

20
5.2 FINANCIAL REQUIREMENT
Source Amount
Personal saving 100000
Bank loan 500000
Friends contribution 60000
Uwezo fund 40000
Total 70000

5.3 WORKING CAPITAL

Items Year 1 Year 2
Current assets
Stock 60000 80000
Debtors 30000 150000
Cash at hand 200000 300000
Cash at bank 500000 70000
Total current assets 790000 1230000

Current liabilities

Bank loan 500000 200000

Creditors 60000 40000
Uwezo funds 40000 40000
Tax 5000 5000
605000 283000

Working capital = current assets- current liabilities

Year 1

= 790000-605000 = 185000

Year 2

21
1230000-285000 =945000

5.4 PERFORMANCE INCOME STATEMENT

Year 1 Year 2
Sales 950000
Less cost of goods sold 100000 150000

Gross profit 850000 1150000

Expenses
Salaries 200000 480000
Rent 60000 45000

Renovation 7000 5000

Licenses 10000 10000
Electricity 60000 45000
Bank loan 800000 200000

Uwezo fund 40000 40000

Total expenses 677000 825000
Net profit before tax 173000 325000

Less 10 tax 17300 32500

Net profit after tax 155700 292500

5.6 BALANCE SHEET

MARYLEAKEY AUTOSPARES SHOP

BALANCE SHEET AS AT 31STDEC

YEAR 1 YEAR2

22
ASSETS

FIXED ASSETS KSHS KSHS

FURNITURE 50 000 60 000

FITTINGS 10 000 15 000

TOTAL FIXED ASSETS 60 000 75 000

CURRENT ASSETS

DEBTORS 30 000 20 000

STOCK 60 000 80 000

CASH AT HAND 200 000 300 000

CASH AT BANK 500 000 800 000

TOTAL CURRENT ASSETS 790 000 1 200 000

TOTAL ASSETS 850 000 1 275 000

LIABILITIES

SHORTERM

CREDITORS 20 000 15 000

TAX 50 000 40 000

TOTAL 70 000 55 000

LONGTERM

LOAN 500 000 200 000

TOTAL LIABILITIES 570 000 255 000

CAPITAL 280 000 1 102 006

TOTAL LIABILITY 790 000 79 000

23
5.7 PERFOMANCE RATIOS
YEAR 1 YEAR 2

a.) Working capital= current

Current assets = 1 275 000
assets/current liabilities.
Current liability = 255 000
Current assets = 850 00
= 1 275 000/255 000
Current liabilities = 570 000
=5
850 000/570 000
= 1.49

b.) Gross profit on sale = (GP/sales)100

GP = 1 150 000
GP = 850 000
Sales = 1 150 000
Sales = 950 000
= 1 150 000/150 000
=(850 000/950 000)100
= 79.64
= 89.47%

c.) Quick ratio = current asset -

Current asset = 1 200 000
stock/current liabilities
Current liabilities = 255 000
Current assets = = 790 000
Stock = 80 000
Current liabilities = 570 000
= 11.8725
Stock = 60 000

d.) Profit margin (net profit/sales)100

Net profit tax = 325 000
Net profit before tax = 173 00
Sales = 1 500 00
Sales =950 000
21.67%
= 18.22%

5.8 BREAKEVEN POINT

B.E.P = contribution (sales) 100

Contribution margin = sale- variable cost

Variable cost = expenses x purchase x tax

Year 1 Year 2

24
 Sales =95000 Sales =1500000
Expenses =677000 Expenses 825000
Tax 5000 Tax 5000

Variable cost = 677000 Variable cost = 825 000

5000 500
682000 30000

Contribution margin Contribution margin

950000- 682 000 1500000
268 000 30000

B.E P = (268 000/950000/100 B.E.P (670000/ 1500000

=28.21% =44.67%

5.9 DESIRED FINANCING

Source amount security repayment schedule

Loan 460000 logbooks 3000 pm

Savings 20000

Donations 25000 receipts 1000p.m

25
5.10 projected cash flow statements for the year 2022

Particulars Jan Feb March April May June July Aug Sep Oct Nov Dec total

Cash in flow

Opening balance or 50000 50100 50200 50300 50400 50500 50600 50700 50800 509000 60000 65000 870000
b/f

Owners equity 200000 200000 200000 200000 200000 200000 200000 200000 200000 200000 200000 200000 200000

Bank loan 330000 330000 330000 330000 330000 330000 330000 330000 330000 330000 330000 330000 330000

Cash sales 12000 130000 150000 11000 140000 130000 140000 900000 1250000 1300000 110000 1300000 13700000
0

Debtors 2000 3000 4000 5000 60000 7000 8000 90000 10000 11000 12000 13000 24000

Any other source-specify

Total cash in flow 170200 1883000 190000 1999000 200000 250000 25000 95000 1900000 1850000 215000 2200000 20630400
0 0 0 0

Pre operational cost 200000 250000 300000 200000 250000 220000 150000 100000 2200000 320000 310000 280000 2500000

purchases 200000 300000 400000 350000 500000 600000 450000 300000 250000 600000 70000 200000 4800000

Payment to creditors 20000 30000 40000 50000 6000 7000 5000 60000 70000 80000 70000 80000 89000

Salary and wages 138000 138000 138000 138000 138000 138000 138000 138000 138000 138000 138000 138000 1600000

Rent 30000 2000 25000 2000 2100 2200 1500 1800 1900 2300 1950 1850 15000

Electricity 12000 2000 2500 2000 2100 2200 1500 1800 1900 2300 1950 1850 15000

Water 500 600 550 450 500 600 550 800 600 750 850 500 6500

Mail 560 570 500 450 300 250 400 380 420 400 380 300 6500

27
Transport 5000 4500 5500 6000 5500 6500 7000 6500 5000 4500 7000 45000 60000

Advertising 10000 8000 7000 3000 8500 9000 9500 1000 9500 10000 7000 6500 67000

Insaurance 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 120000

Loan repayment 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 20000 240000

Interest on loan 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 18000

Taxes any other 15000 12000 13000 10000 11000 10000 12000 14500 15000 16000 10000 13500 180000
pecify

Total cash out flow 1300000 120000 130000 1250000 1400000 135050 1400005 1500000 120000 140000 150000 110000 1084000
0 0 0

Net cash for the 482000 603100 599500 650000 600000 115000 1100000 450000 45000 750000 450000 110000 9816400
month 0 0

Projected cash flow statements for the year 2023

Particulars Jan Feb March April May June July Aug Sep Oct Nov Dec total

Cash in flow

Opening balance or 70000 70100 70200 70300 70500 71000 72000 73000 73500 73600 74000 75000 8940000
b/f

28
Owners equity 250000 250000 250000 250000 250000 250000 250000 250000 250000 250000 250000 250000 3000000

Bank loan 172000 200000 273800 2788000 300000 320000 290000 172000 180000 190000 175000 18000 2100000

Cash sales 133000 1350000 1400000 11000 1100000 1200000 1300000 900000 2000000 300000 2500000 2200000 15600000
0

Debtors 8000 7000 6000 5000 6500 5000 7800 10000 9000 8000 6000 7000 85300

Any other source-specify

Total cash in flow 180000 1900000 200000 22000000 2300000 2500000 3000000 400000 3500000 300000 2500000 3500000 32200000
0

Cash out flow

Pre operational cost 400000 350000 380000 400000 450000 480000 500000 600000 450000 350000 320000 300000 5300000

purchases 300000 250000 550000 460000 480000 500000 560000 600000 380000 420000 460000 530000 140000

Payment to creditors 14000 13000 12500 15000 14500 13000 14000 13500 9000 8000 7000 6000 110000

Salary and wages 90000 100000 850000 950000 90000 85000 870000 92000 94000 90000 89000 92000 1700000

Rent 30000 28000 25000 32000 30000 42000 38000 35000 28000 39500 30000 32000 200000

Electricity 500 300 200 350 600 450 480 350 280 380 400 450 7000

Water 500 300 200 350 600 450 380 450 280 380 400 450 7000

Telephone 3500 3800 3200 3000 3000 3200 3100 2800 3200 3500 3200 2800 43000

Mail 900 800 600 400 450 600 550 700 800 1000 950 600 12000

Transport 6000 5500 6500 7500 3500 4000 6000 9000 1100 10000 9000 8000 80000

29
Advertising 65000 9000 10000 8000 7000 6500 8800 8500 10000 6000 8500 9000 80000

Insaurance 65000 9000 8000 5500 7500 10000 9500 8500 6500 6200 6700 6000 85000

Loan repayment 19000 11000 12000 12500 14000 18000 12500 13500 11000 10000 13000 14000 140000

Interest on loan 1916 1916 1916 1916 1916 1916 1916 1916 1916 1916 1916 1916 23000

Taxes any other 16000 15000 13000 12500 11000 11500 13000 15000 14000 10000 14000 15000 200000
specify

Total cash out flow 1400000 1450000 1650000 135000 1470000 150000 175000 2000000 2500000 180000 2300000 1800000 20970000

Net cash for the 400000 450000 350000 85000 830000 1000000 1250000 2000000 100000 120000 200000 170000 1038000
month 0

30
5.11 CHALLENGES
High Interest Rates

Banks and other money lending institutions change extremely high prices this making it difficult
to acquire high amount required to start the business. They also don’t offer flexible loan
repayment and therefore regardless whether the business makes profits or loss the loan must be
repaid

Counterfeits good

Some supplier supply our business with substandard goods which scare away our customers

5.12 REMEDIES
Looking for alternative sources of financial will solve the challenge of

31